Log in to StudySoup
Get Full Access to Intermediate Algebra - 6 Edition - Chapter 7.5 - Problem 81
Join StudySoup for FREE
Get Full Access to Intermediate Algebra - 6 Edition - Chapter 7.5 - Problem 81

Already have an account? Login here
Reset your password

Rationalize each numerator. See Example 7.2x + 12x - 1

Intermediate Algebra | 6th Edition | ISBN: 9780321785046 | Authors: Elayn El Martin-Gay ISBN: 9780321785046 180

Solution for problem 81 Chapter 7.5

Intermediate Algebra | 6th Edition

  • Textbook Solutions
  • 2901 Step-by-step solutions solved by professors and subject experts
  • Get 24/7 help from StudySoup virtual teaching assistants
Intermediate Algebra | 6th Edition | ISBN: 9780321785046 | Authors: Elayn El Martin-Gay

Intermediate Algebra | 6th Edition

4 5 1 355 Reviews
Problem 81

Rationalize each numerator. See Example 7.2x + 12x - 1

Step-by-Step Solution:
Step 1 of 3

Chapter 17 Notes  Quantity theory of money  Price rises when the government prints too much money  Most economist believe the quantity theory is a good explanation of the long run behavior of inflation  The Value of money  P = the price level  Price level- the price of a basket of goods, measured in money  1/P is the value of $1, measured in goods  ex. If P = $2, value of $1 is ½ candy bar  inflation drives up prices and drives down the value of money  Money supply (MS)  In the real world, the MS is determined by Federal Reserve, the banking system, and consumers  In this model, we assume the Fed precisely controls MS and sets it at some fixed amount  Money Demand (MD)  Refers to how much wealth people want to hold in liquid form  Depends on P  An increase in P reduced the value of money, so more money is required to buy goods and services  Thus, quantity of money demanded is negatively related to the value of money, and positively related to P, other things equal  (these other thins include, real income, interest rates, availability of ATMs)  as the price level falls, the value of money rises and vise versa  The Fed sets MS at some fixed value regardless of P  Perfectly inelastic  A fall in the value of money (or increase in P) increases the quantity of money demanded  Downward sloping, just like a regular demand curve  P adjusts to equate quantity of money demanded with money supply  Equilibrium price level  Suppose the fed increases the money supply…  Then the value of money falls, and P rises  How does this work  At the initial P, an increase in MS causes excess supply of money  People get rid of their excess money by spending it on goods and services or by loaning it to others, who spend it  Result- increased demand for goods  But supply of goods does not increase, so price must rise  Real vs. Nominal Variables  Nominal variables- are measured in monetary units  ex. Nominal GDP, nominal interest rate (rate of return measure in $), nominal wage ($ per hour worked)  price is a nominal variable  real variables- are measured in physical units  ex. Real GDP, real interest rate (measured in output), real wage (measured in output)  relative price is real variable  relative price- the price of one good related to (divided by) another  measured in physical units  Real vs. Nominal Wage  W= nominal wage = price of labor  Ex. $15 per hour  P= price level= price of goods and services  Ex. $5 unit of output  Real wage is the price of labor relative to the price of output  W divided by P  Classical Dichotomy- the theoretical separation of nominal and real variables  Hume and the classical economists suggest that monetary developments affect nominal variables, but not real variables  If central banks double the money supply, Hume and classical thinkers contend…  All nominal variables – including prices – will double  All real variables – including relative prices – will remain unchanged  Monetary Neutrality- the proposition that changes in the money supply do not affect real variables  Doubling the money supply causes all nominal price to double, the relative price is unchanged (real variable)  Velocity of money- the rate at which money changes hands  P X Y = nominal GDP  (price level) x (real GDP)  M = money supply  V = velocity  Velocity formula = (P x Y) / M  Velocity is fairly stable over time  The Quantity Equation  Velocity Formula = (P x Y) / M  Multiply both sides by M  M x V = P x Y  Called quantity equation  Represents the entire economy  What does the quantity equation tell you  Velocity is stable  So, a change in M causes nominal GDP (P x Y) to change by the same percentage  A change in M does not affect Y  Money is neutral  Y is determined by technology and resources  P changes by the same percentage as P x Y and M  Rapid money supply growth causes rapid inflation  Things to remember about the Quantity Theory of Money  If real GDP (Y) is constant, then inflation rate = money grow rate  If real GDP (Y) is growing, then inflation rate < money growth rate  The bottom line:  Economic growth increase number of transactions  Some money growth is needed from these extra transactions  Excessive money growth causes inflation  Hyperinflation- generally defined as inflation exceeding 50% per month  Caused by government printing too much money  Excessive growth in the money supply always causes hyperinflation  Inflation tax- the revenue from printing money  When tax revenue is inadequate and ability to borrow is limited, government may print money to pay for its spending  Almost all hyperinflation starts this way  Printing money causes inflation, which is like a tax on everyone who holds money  In the U.S. the inflation tax today accounts for less than 3% of total revenue  The Fisher Effect  Nominal interest rate = inflation rate + real interest rate  In the long run, money is neutral, so a change in the money growth rate affects the inflation rate but not the real interest rate  The nominal interest rate adjusts one-for-one with changes in the inflation rate  This relationship is called the Fisher effect, after Irving Fisher who studied it  The Fisher effect- an increase in inflation causes an equal increase in the nominal interest rate, so the real interest rate is unchanged  In other words, a 1% increase in inflation causes a 1% increase in the nominal interest rate  The cost of inflation  Inflation fallacy- most people think inflation erodes real incomes or their purchasing power  But, inflation is a general increase in price of the things people buy and the things they sell (ex. Labor), so incomes rise with inflation  In the long run, real incomes are determined by real variables, such as human capital, physical capital, technology, and natural resources, not the inflation rate  Nominal income = real income + inflation  Shoeleather costs- the resources wasted when inflation encourages people to reduce their money holdings  Includes the time and transaction costs of more frequent bank withdrawals  Menu costs- the cost of changing prices  Printing new menus, mailing new catalogs, etc.  Higher inflation causes more frequent price changes which leaders to higher menu costs  Earning interest on your money helps offset inflation  Misallocation of resources from relative-price variability- firms don’t all raise prices at the same time, so relative prices can vary which distorts the allocation of resources  Confusion and inconvenience- inflation changes the yardstick we use to measure transactions  Complicates long-range planning and the comparison of dollar amounts over time  Tax distortions  Inflation makes nominal income grow faster than real income  Taxes are based on nominal income, and some are not adjusted for inflation  Inflations causes people to pay more taxes even when their real incomes don’t increase  Arbitrary redistribution of wealth- higher-then-expected inflation transfers purchasing power from creditors to debtors  Debtors get to repay their debt with dollars that aren’t worth as much  Lower- than – expected inflation transfers purchasing power from debtors to creditors  High inflation is more variable and less predictable than low inflation  These arbitrary redistributions are frequent when inflation is high  Cost of inflation  All these costs are quite high for economies experiencing hyperinflation  For economies with low inflation (<10% per year), these costs are probably smaller, though their exact size is open to debate

Step 2 of 3

Chapter 7.5, Problem 81 is Solved
Step 3 of 3

Textbook: Intermediate Algebra
Edition: 6
Author: Elayn El Martin-Gay
ISBN: 9780321785046

The full step-by-step solution to problem: 81 from chapter: 7.5 was answered by , our top Math solution expert on 12/23/17, 04:59PM. The answer to “Rationalize each numerator. See Example 7.2x + 12x - 1” is broken down into a number of easy to follow steps, and 10 words. Intermediate Algebra was written by and is associated to the ISBN: 9780321785046. This textbook survival guide was created for the textbook: Intermediate Algebra, edition: 6. Since the solution to 81 from 7.5 chapter was answered, more than 243 students have viewed the full step-by-step answer. This full solution covers the following key subjects: . This expansive textbook survival guide covers 90 chapters, and 8410 solutions.

Other solutions

People also purchased

Related chapters

Unlock Textbook Solution

Enter your email below to unlock your verified solution to:

Rationalize each numerator. See Example 7.2x + 12x - 1